IN THE KWAZULU-NATAL HIGH COURT, DURBANREPUBLIC OF SOUTH AFRICA

Case No: 10605/2011

In the matter between:

LONGFIELDS TRADING CC Applicant

and

SHERRYL GAYLE BRADFIELD First Respondent

NAKED SOLUTIONS 001 t/a HEADWEAR 24 GLOBAL MANUFACTURERS Second Respondent

JUDGMENT

SEEGOBIN J

[1] The applicant, Longfields Trading CC, carries on business as a manufacturer

and supplier of hair accessories. It trades under the name “Chic”. The first

respondent is Sherryl Gayle Bradfield. The second respondent is Naked

Solutions 001 which trades as Headwear 24 Global Manufacturers.

[2] The business of Chic was originally owned by one Bruno Watzek (“Watzek”)

who is the first respondent’s brother-in-law. Chic was started by Watzek some

forty (40) years ago and from the outset the first respondent was employed by it

as a buyer and sales executive. Some years ago Watzek sold the business to

one Mark Tonkinson. In about mid July 2008 the applicant acquired the business

from its then proprietor, Longfield Sales and Marketing CC alternatively

Tonkinson who controlled the members’ interest in Longfield Sales and

Marketing CC. The members’ interest in the latter entity was sold to one Errol

Anstey (“Anstey”) and Roy Douglas Hockey (“Hockey”). The proprietor of Chic is

now the applicant, controlled by Anstey and Hockey.

[3] The present application was launched as a matter of urgency on 21

September 2011. The applicant seeks interdictory relief against the first and

second respondents in the following form:

“1. A rule nisi do issue calling upon SHERRYL GALE BRADFIELD (“the

first respondent”) and NAKED SOLUTIONS 001 trading as HEADWEAR 24 (“the second respondent”) to show cause to this Honourable Court

sitting at Durban on the day of OCTOBER 2011 at 09h30 or so soon

thereafter as the matter may be heard, why an Order should not be made

in terms set out in paragraphs 2 to 8 (inclusive) of this Order.

2. The first respondent is interdicted and restrained, for a period of 3 (three)

years commencing 24 August 2011 and terminating 23 August 2014,

anywhere within the Republic of South Africa, and whether directly or

indirectly and whether solely or jointly with any other person, from:

2.1. carrying on; or

2.2. being engaged, concerned or interested in or employed by; or

2.3. soliciting business for; or

2.4. being a proprietor of or director, shareholder, member or partner

in; or

2.5 acting as a consultant, trustee, manager, employee, agent,

representative, partner, advisor, officer or in any other capacity to;

or

2.6 rendering any service to,

any business, person, company, close corporation, partnership, trust,

body corporate or incorporate, association or other legal entity which

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within the Republic of South Africa competes with or endevours to

compete with the applicant in relation to the applicant’s clients, including,

without limiting the generality of the aforegoing, the second respondent,

insofar as the second respondent continues to compete or endeavours to

compete with the applicant in relation to the applicant’s customers.

3. The first respondent is interdicted and restrained for a period of 3 (three)

years commencing 24 August 2011 and terminating 23 August 2014 from,

anywhere in the Republic of South Africa, canvassing, influencing or

trying to persuade any customer of the applicant to take its custom

elsewhere and/or to purchase the services and/or goods offered by the

applicant from any other person/entity, including, without derogating from

the generality of the aforegoing, the second respondent, and, for

purposes of the aforegoing “customer” shall mean any person/entity listed

in annexure “B” to the notice of motion.

4. The first respondent is interdicted and restrained, for a period of 3 (three)

years, commencing 24 August 2011 and terminating 23 August 2014

from, anywhere in the Republic of South Africa, offering employment to or

causing to be employed any person who was employed by the applicant

at any time within the 2 (two) year period immediately preceding 24

August 2011.

5. The first respondent is interdicted and restrained from at any time

utilising, divulging and/or disclosing, whether directly or indirectly, to any

person any of the applicant’s confidential information pertaining to the

applicant’s business.

6. The second respondent is interdicted and restrained from canvassing,

trying to persuade or influencing any customer of the applicant, as listed

in annexure “B” to the notice of motion, to transfer any of its custom to the

second respondent in relation to any of the products sold or offered for

sale by the applicant, as listed in annexure “A” to the notice of motion, or

to offer to sell, or to sell any such products to any of the applicant’s

customers, as listed in annexure “B” to the notice of motion.

7. The second respondent is interdicted and restrained from utilising any

confidential information pertaining to the applicant’s business

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communicated to the second respondent by or through the first

respondent at any time.

8. The first and second respondents are ordered jointly and severally, the

one paying, the other to be absolved, to pay the costs of the applicant’s

costs of suit.

9. The Orders in paragraphs 2 to 7 (inclusive) of this Order shall operate as

interim orders with immediate effect.

10. Further, other and/or alternative relief.”

Annexure A to the Notice of Motion contains a list of the following products:

Hair Clips

Hair brushes

Combs

Hair attachments

Hair bands

Hair extensions

Head Pieces

Hair slides

Hair grips

Alice Bands

Head Bands

Hair accessories

Annexure B contains a list of the following customers:

Clicks

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Foschini

Miladys

Edgars

Mr Price

Spar

[4] On 23 September 2011, the first and second respondents consented to

certain interim relief being granted against them pending final determination of

the matter. The parties further agreed on dates for the filing of papers. The

matter was fully argued before me on 21 October 2011. The applicant was

represented by Mr Smithers SC and the respondents were represented by Mr

Saks and Mr Pillay respectively. The relief sought is final in effect. It is trite that

a final order can only be granted in motion proceedings if the facts stated by the

respondent together with the admitted facts in the applicant’s affidavits justify the

order, and this applies irrespective of where the onus lies1.

[5] The interdictory relief against the first respondent is for the enforcement of a

restraint of trade agreement with the applicant while the relief against the second

respondent is to restrain it from competing unlawfully with the applicant. The

relief sought against the second respondent is founded in delict. The relief

against both respondents is limited to a period of three (3) years, effective from

24 August 2011, the date on which the first respondent left the applicant’s

employment. It is common cause that the first respondent is now employed by

the second respondent.

THE RESTRAINT

[6] The restraint clause relied upon by the applicant is contained in Annexure

1 Plascon-Evan Paints v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634 H – 635 B

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“RH2” to the founding papers. “RH2” is a Letter of Appointment that was signed

by the first respondent on 3 June 2008 at the time when the applicant acquired

the business of Chic. The clause reads as follows:

“You shall not within a period of 3 (three) years after the Termination Date,

whether directly or indirectly and either solely or jointly:

• carry on; or

• be engaged, concerned or interested in or employed by; or

• solicit business for; or be a proprietory director, shareholder,

member or partner in; or

• act as a consultant, trustee, manager, employee, agent,

representative, partner, advisor, officer or in any other capacity to;

or

• render any service to; or

• lend or advance or bind yourself as surety for, any sum of money

or otherwise assist financially, any business, person, company,

close corporation, partnership, trust, body corporate or

incorporate, association or other legal entity which within the

Territory (the Republic of South Africa] competes with or

endeavours to compete with the Company in relation to the

Company’s clients.

• Canvas, influence or try to persuade any customer of the

Company to take its custom elsewhere and/or to purchase the

services offered by the Company from any other person/entity

and, for purposes of the aforegoing, “customer” shall mean any

person/entity which has at any time prior to the Termination Date

utilised or placed an order to utilise or negotiated to utilise the

services offered by the Company; within a period of 3 (three)

years prior to your Termination Date;

• Offer employment to or cause to be employed any person who

was employed by the Company at any time within the 2 (two) year

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period immediately preceding the Termination Date.

The restraints imposed on the Restrained Party in terms of this

provision shall be deemed to be, in respect of each party thereof,

entire, separate, severable and separately enforceable in the widest

sense from the other parts thereof. An undertaking or restraint shall

be deemed to be a separate undertaking or restraint notwithstanding

the fact that it appears in the same clause, sub-clause or sentence as

any other undertaking, or is imposed by the introduction of a word or

phrase conjunctively with or disjunctively from or alternatively to other

words or phrases.

The Restrained Party hereby acknowledges, agrees and records that

he has given careful consideration to the restraints as provided for

herein and that such restraints are fair and reasonable (after taking all

relevant circumstances into consideration) and go no further than is

reasonably necessary to protect the Protectable interests.

The restrains imposed upon the Restrained Party in terms of these

provisions shall be deemed to have been imposed separately in

respect of each of the countries, provinces, states or territories

forming part of the Territory and the fact that it may not be valid or

enforceable in respect of any one of such countries, provinces, states

or territories shall not affect its validity or enforceability in the other

countries, provinces, states or territories forming part of the Territory.

The restraints imposed upon the Restrained Party in terms of the

provisions herein shall not preclude:

• The Restrained Party, after the Termination Date, from being

engaged generally in any entity which carries on the business

of a private equity fund, provided that he does not compete

with or endeavour to compete with any investment or potential

investment of the Company;

• The Restrained Party from holding, by way of bona fide

investments, any shares, stocks, debentures, debenture stock

or other securities of any company which is quoted and dealt

with on any recognized stock exchange in the Territory and

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which carries on any business which is similar to or will

compete with or endeavour to compete with the Business,

provided that such holding (which shall include any interest in

any such holding) does not exceed 5% (Five Percent) of the

total shares, stock, debentures, debenture stock or other

securities of such company in issue, provided always that

nothing herein contained shall permit the Restrained Party

from directly or indirectly being actively engaged or concerned

or interested in any way in the affairs or management of any

such company.”

[7] The words “the Protectable Interests” as used in the above clause

“mean the Company’s goodwill, technical and business know-how, trade secrets,

confidential information in connection with the Business and the Company’s

intangible assets in general which are not readily available to a competitor of the

Company in the ordinary, normal and regular course of business.”

IN LIMINE OBJECTIONS

[8] The respondents raised two preliminary objections to the application. The

first was whether the contract (“RH2”) containing the restraint clause was a pre-

incorporation contract and if so, whether it had been properly ratified or adopted

by the applicant. The second concerned the effect of section 1972 of the Labour

2 197. Transfer of contract of employment.—(1) In this section and in section 197A—(a) “business” includes the whole or a part of any business, trade, undertaking or service; and

(b) “transfer” means the transfer of a business by one employer (“the old employer”) to another employer (“the new employer”) as a going concern.

(2) If a transfer of a business takes place, unless otherwise agreed in terms of subsection (6)—(a) the new employer is automatically substituted in the place of the old employer in respect of all contracts

of employment in existence immediately before the date of transfer;(b)

all the rights and obligations between the old employer and an employee at the time of the transfer continue in force as if they had been rights and obligations between the new employer and the employee;

(c)anything done before the transfer by or in relation to the old employer, including the dismissal of an employee or the commission of an unfair labour practice or act of unfair discrimination, is considered to have been done by or in relation to the new employer; and

(d) the transfer does not interrupt an employee’s continuity of employment, and an employee’s contract of employment continues with the new employer as if with the old employer.

(3) (a) The new employer complies with subsection (2) if that employer employs transferred employees on terms and conditions that are on the whole not less favourable to the employees than those on which they were employed by the old employer.

(b) Paragraph (a) does not apply to employees if any of their conditions of employment are determined by a collective agreement.

(4) Subsection (2) does not prevent an employee from being transferred to a pension, provident, retirement or

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Relations Act (“LRA”) on the contract.

SECTION 53 OF THE CLOSE CORPORATIONS ACT 69 OF 1984 (“THE ACT”) AND SECTION 197 OF THE LRA

[8.1] Section 53 of the Close Corporations Act provides that any contract

in writing, entered into by a person professing to act as an agent or a

trustee for a corporation not yet formed, may after its incorporation be

ratified or adopted by such corporation as if the corporation had been duly

incorporated at the time when the contract was entered into (s53(1)).

Section 53(2) requires the ratification or adoption to take place in the form

of a consent in writing of all the members of the corporation, given within a

time specified in the contract or, if no time is specified, within a reasonable

time after incorporation.

similar fund other than the fund to which the employee belonged prior to the transfer, if the criteria in section 14 (1) (c) of the Pension Funds Act, 1956 (Act No. 24 of 1956), are satisfied.53a

(5) (a) For the purposes of this subsection, the collective agreements and arbitration awards referred to in paragraph (b) are agreements and awards that bound the old employer in respect of the employees to be transferred, immediately before the date of transfer.

(b) Unless otherwise agreed in terms of subsection (6), the new employer is bound by—

i) any arbitration award made in terms of this Act, the common law or any other law;ii) any collective agreement binding in terms of section 23; and

iii) any collective agreement binding in terms of section 32 unless a commissioner acting in terms of section 62 decides otherwise.

(6) (a) An agreement contemplated in subsection (2) must be in writing and concluded between—(i) either the old employer, the new employer, or the old and new employers acting jointly, on

the one hand; and(ii) the appropriate person or body referred to in section 189 (1), on the other.

(b) In any negotiations to conclude an agreement contemplated by paragraph (a), the employer or employers contemplated in subparagraph (i), must disclose to the person or body contemplated in subparagraph (ii), all relevant information that will allow it to engage effectively in the negotiations.

(c) Section 16 (4) to (14) applies, read with the changes required by the context, to the disclosure of information in terms of paragraph (b).

(7) The old employer must—(a) agree with the new employer to a valuation as at the date of transfer of—

(i) the leave pay accrued to the transferred employees of the old employer;(ii) the severance pay that would have been payable to the transferred employees of the old

employer in the event of a dismissal by reason of the employer’s operational requirements; and

(iii) any other payments that have accrued to the transferred employees but have not been paid to employees of the old employer;

(b) conclude a written agreement that specifies—(i) which employer is liable for paying any amount referred to in paragraph (a), and in the

case of the apportionment of liability between them, the terms of that apportionment; and(ii) what provision has been made for any payment contemplated in paragraph (a) if any

employee becomes entitled to receive a payment;(c) disclose the terms of the agreement contemplated in paragraph (b) to each employee who after the

transfer becomes employed by the new employer; and(d) take any other measure that may be reasonable in the circumstances to ensure that adequate

provision is made for any obligation on the new employer that may arise in terms of paragraph (a).(8) For a period of 12 months after the date of the transfer, the old employer is jointly and severally liable with

the new employer to any employee who becomes entitled to receive a payment contemplated in subsection (7) (a) as a result of the employee’s dismissal for a reason relating to the employer’s operational requirements or the employer’s liquidation or sequestration, unless the old employer is able to show that it has complied with the provisions of this section.

(9) The old and new employer are jointly and severally liable in respect of any claim concerning any term or condition of employment that arose prior to the transfer.

(10) This section does not affect the liability of any person to be prosecuted for, convicted of, and sentenced for, any offence.

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[8.2] Annexure “RH2” was signed by the first respondent on 3 June 2008

and by Anstey on 4 June 2008. The preamble to “RH2” reads as follows:

“As trustee of a company or close corporation still to be formed (The

Company) under the terms of the Longfield Sales & Marketing CC (LSM)

sale agreement signed by myself, Mark Tonkinson and Roy Hockey and

witnessed by you, I hereby confirm the terms of your employment with

The Company as agreed.”

[8.3] It was contended on behalf of the respondents that since Anstey

concluded the contract as a trustee of a company or close corporation

which at that time still had to be formed, the applicant was obliged to

comply with the provisions of section 53 of the Close Corporations Act. It

was further contended that the applicant had failed to allege such

ratification or adoption and failed to put up such written report. The

applicant on the other hand maintained that the contract was a stipulatio

alteri as a consequence of which it did not need to comply with section 53

of the Act.

[8.4] The Longfields Sales and Marketing CC (“LSM”) sale agreement

referred to above and which was witnessed by the first respondent, is

Annexure “RH14” to the applicant’s replying affidavit.

[8.5] Annexure “RH13” to the applicant’s replying affidavit is the

Memorandum of Agreement which was concluded when Watzek sold the

business of Chic to Tonkinson and Hockey. This agreement will hereafter

be referred to as “the Watzek Agreement”. It is significant to note that the

first respondent was also a party to this agreement.

[8.6] In order to decide these arguments in limine, it is perhaps

convenient to briefly examine the purpose for which the applicant was

formed and how the agreements referred to above came into being.

[8.7] There can be no dispute about the following facts: The business of

Chic was, until June 2006, owned by WATTAN ENTERPRISES (PTY)

LTD, and controlled by Watzek. On 6 June 2006 Wattan sold the

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business to Tonkinson in his capacity as a trustee for a close corporation

to be formed or purchased. Tonkinson duly formed a close corporation

called Longfield Sales and Marketing CC (“LSM”) in which Tonkinson and

Hockey became co-members. The Watzek agreement (“RH13”) relates to

the contract of sale of the business to LSM.

[8.8] There are certain salient features of the Watzek agreement which

cannot be ignored:

[8.8.1] The first respondent initialed each page and signed this

agreement on 6 June 2006.

[8.8.2] Clause 17 of the agreement contains a restraint of trade

clause which relates to both Watzek and the first respondent.

[8.8.3] Clause 3 deals with the position of employees and provides

as follows:

“Employees”

13.1 Unless otherwise agreed by an employee, all rights and

obligations between the Seller and each of the persons

employed by the Seller in connection with the business on

the Effective Date (close of business on 28 February 2006)

will continue in force on and after the Effective Date in

accordance with the requirements of section 197 of the

Labour Relations Act, 1995 as if there had been rights and

obligations between the Buyer and the said employees …”

[8.9] On 22 and 23 May LSM sold the business of Chic to Anstey in his

capacity as trustee for a company or close corporation to be formed. The

LSM Sale Agreement is Annexure “RH14” as mentioned above.

[8.10] The salient features of “RH14” are the following:

[8.10.1] The first respondent signed “RH14” as a witness.

[8.10.2] Clause 2 of the LSM Sale agreement contains certain

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suspensive conditions to which the LSM Sale Agreement was

subject. One of the suspensive conditions was that the sale

agreement would be of no force and effect unless fourteen (14)

days from the date of signature of the LSM Sale Agreement, or

such later date as the parties may agree in writing, Anstey provided

Tonkinson with confirmation that Anstey was satisfied that the first

respondent would continue to be employed in the business after the

effective date (1 July 2008) in terms of a written agreement of

employment to the satisfaction of Anstey, and that her employment

would be governed by a suitable restraint of trade. It was for this

reason, so it seems, that the first respondent was requested to read

and sign the LSM Sale Agreement as a witness.

[8.10.3] Clause 13 of the LSM Sale Agreement relates to the

position of employees and provides as follows:

“13. EMPLOYEES

13.1 In accordance with section 197 of the Labour Relations Act

6 of 1995, as amended, the contracts of employment with

employees of the Business will automatically transfer to the

Purchaser.

13.2 The Seller shall be responsible for all liabilities to

employees up to the Effective Date (1 July 2008) subject to

the provisions of clause 7 above, and the purchaser

thereafter.

13.3 The Seller and Purchaser agree that they shall effect a

valuation as at the effective date (1 July 2008) of the leave

pay, severance pay and any other payments accrued to

employees as contemplated in section 197(a) of the

Labour Relations Act 1995, as amended.

13.4 It is further recorded that the Seller and Purchaser have

agreed herein that the Purchaser shall be liable for all

payments of the amounts valued in terms of clause 13.3

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and that the Sellers contribution is similarly recorded

herein. The Purchaser shall meet any payments from its

own resources.”

[9] From all of the above, there can be no dispute that the applicant was duly

formed for the purpose of acquiring the business of Chic. Hockey and Anstey

became co-members in the applicant.

[10] It seems to me, that the LSM Agreement of Sale was in fact a stipulatio

alteri for the benefit of the applicant. In these circumstances, there was no need

for the applicant to have complied with the provisions of section 53 of the Act.

Furthermore, it sees to me that the first respondent was, at all material times,

fully aware of her position both in so far as the Watzek Agreement is concerned

as well as the LSM Agreement which she was asked to witness. There can be

no dispute that the first respondent was a key employee in the business before

and after it was sold to the applicant. In my view, she was fully aware of her

rights and obligations which flowed from the agreements that were concluded

relating to the sale of the business and the formation of the applicant herein.

[11] The first respondent’s contentions that the terms of the restraint as

contained in “RH2” were less favourable to her than those contained in the

Watzek Agreement and that she was “duped” into signing the contract, ring

rather hollow when one has regard to the role she herself played in the

conclusion of the agreements referred to above. Additionally, the relevant

agreements make full provision for the employees of the business and the effect

of s197 of the LRA on them. No doubt, the first respondent would have raised

objections and/or disputes concerning the terms of the restraint if she seriously

believed that she would be prejudiced thereby. She did not. In my view, her

current objections, raised as they are in this application, are rather opportunistic.

The first respondent bore the onus3 of establishing that when she signed the

3 Savvidies v Savvidies 1986(2) SA 325 (T). See also, n duress in general: Kerr The Principles of the Law

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contract (“RH2”), she did so as a result of misrepresentations, duress or being

unduly influenced in some way or the other. The first respondent has failed to

discharge the onus in this regard. I accordingly find that the technical defences

raised by the respondents fall to be dismissed for the reasons set out above.

[12] I turn now to consider whether the applicant has made out a proper case for

the interdictory relief which it seeks against the respondents. I commence by

looking at the case made out against the first respondent.

CASE AGAINST FIRST RESPONDENT

[13] It is well established that restraint of trade agreements are enforceable

unless, and to the extent that, they are contrary to public policy because they

impose an unreasonable restriction on the former employee’s freedom to trade or

to work4. The onus of proving that the restraint is unreasonable and

unenforceable rests upon the former employee5. The acceptable test is that set

out in Basson v Chilwan & Others6 and is the following:

(a) Does the one party have an interest that deserves protection after

termination of the agreement?

(b) If so, is that interest threatened by the other party?

(c) In that case, does such interest weigh qualitatively and quantitatively

against the interest of the other party not to be economically inactive and

unproductive?

(d) Is there an aspect of pubic policy having nothing to do with the

relationship between the parties that requires that the restraint be

maintained or rejected?

of Contract 3rd Ed, 191. Christie The Law of Contract in South Africa 5th Ed, 309.4 Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984(4) SA 874 (A) at 891 B-C5 Magna Alloys supra. See also Den Braven SA (Pty) v Pillay & Another 2008(6) SA 229 (D & CLD) at 234 A-C6 1993 (3) SA 742(A) at 767 G-H

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In Reddy v Siemens Telecommunications (Pty) Ltd 2007(2) SA 486 SCA, a fifth

factor was considered, viz whether the restraint goes further than necessary to

protect the interest.

[14] The issue to be determined at the outset is whether the applicant has a

protectable interest that is threatened by Mrs Bradfield’s employment with the

second respondent. In contending that it had a protectable interest the applicant

relied on a risk of harm to its customer or trade connections and the risk of

disclosure and use of confidential information.

CUSTOMER OR TRADE CONNECTIONS

The legal position where an employer seeks to enforce a restraint of trade

agreement on the basis of a risk of harm to its trade connections and in particular

its connections with its customers have been authoritatively set out as follows7:

“The need of an employer to protect his trade connections arises where the

employee has access to customers and is in a position to build up a particular

relationship with the customers so that when he leaves the employer’s service he

could easily induce the customers to follow him to a new business (Joubert

General Principles of the Law of Contract at 19). Heydon The Restraint of Trade

Doctrine (1971) at 108, quoting an American case, says that the ‘customer

contract’ doctrine depends on the notion that

‘the employee, by contract with the customer, gets the customer so

strongly attached to him that when the employee quits and joins a rival he

automatically carries the customer with him in his pocket’.

In Morris (Herbert) Ltd v Saxelby [1916] 1 AC 688 (HL) at 709 it was said that the

relationship must be such that the employee acquires

‘such personal knowledge of and influence over the customers of his

7 Rawlins and Another v Caravantruck (Pty) Ltd 1993(1) SA 537 (A) at 541 D-H. See also Nampesca (SA) Products (Pty) Ltd and Another v Zanderer and Others 1991(1) SA 886 (C) at 899 B-900C

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employer … as would enable him (the servant or apprentice), if

competition were allowed, to take advantage of his employers trade

connection …’

This statement has been applied in our Courts (for example, by Eksteen J in

Recycling Industries (Pty) Ltd v Mohammed and Another 1981 (3) SA 250 (E) at

256C-F). Whether the criteria referred to are satisfied is essentially a question of

fact in each case, and in many, one of degree. Much will depend on the duties of

the employee; his personality; the frequency and duration of contact between him

and the customers; where such contact takes place; what knowledge he gains of

their requirements and business; the general nature of their relationship

(including whether an attachment is formed between them, the extent to which

customers rely on the employee and how personal their association is); how

competitive the rival businesses are; in the case of a salesman, the type of

product being sold; and whether there is evidence that customers were lost after

the employee left …”

[15] It should be noted that a mere contact that the former employee had with

the employers customers in the ordinary course of their work, is not sufficient for

a conclusive finding that a protectable interest in the form of customer connection

had arisen: the connection between the former employee and the customer must

be such that it will probably enable the former employee to induce the customer

to follow him or her to a new business8.

[16] There is no dispute at all that the first respondent was a key employee of

the applicant. According to the applicant, the first respondent was the face of the

applicant insofar as the customers were concerned. In fact, she was integral to

the applicant’s business. She was the primary interface between the applicant

and the applicant’s major retail customers, viz Clicks, Mr Price, Edgars, Milady’s

and Foschini. Being the applicant’s major retail accounts manager, the first

respondent built up strong, ongoing relationships with the buyers of these retail

customers particularly Clicks, which according to the applicant accounted for

8 Walter McNaughtan (Pty) Ltd v Schwartz and Others 2004 (3) SA 381 (C) at 390 C-D

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approximately fifty five percent (55%) of the applicant’s annual turnover and

which utilised the applicant as its sole supplier of its hair accessories and related

range for many years.

[17] The first respondent’s answer to all this is to aver that the relationships she

developed with the applicant’s customers were already in place when the

applicant purchased the business of Chic and employed the first respondent with

effect from 1 July 2008. The thrust of this defence seems to be that the applicant

had no customer connections to protect, because the customer connections were

either part of the first respondent’s general stock of knowledge, skill and

experience that are personal to her, or the customer connections were the first

respondent’s personal customer connections and not the applicant’s. As already

mentioned, the first respondent was employed in the business throughout her

working life, commencing some forty (40) years ago when the business of Chic

was owned by Walton Enterprises, controlled by Watzek. As such, the

relationships that the first respondent built up with Wattan’s customers over the

years were Wattan’s customer connections and accordingly protectable at the

instance of Wattan. No explanation has been advanced by the first respondent

as to how or when Wattan’s customer connections became part of the first

respondent’s general stock of skill, knowledge and experience, personal to her.

What is apparent is that Wattan sold its business, including the goodwill to

Tonkinson who, in turn sold the business (including the goodwill) to the applicant.

[18] The onus being on the first respondent to establish the unreasonableness of

the restraint,9 it was for her to show that she never acquired any significant

personal knowledge of or influence over the persons she dealt with as a sales

person of the applicant, over and above that which previously existed. The first

respondent has not done so.

9 Magna Alloys, supra. See also Rawlins and Another v Caravantruck (Pty) Ltd, supra, at 542F-543B

17

[19] The first respondent’s further attack on the restraint was to say that price is

more important than her skill or expertise or the relationship that she may have

fostered with the applicant’s customers. While price is no doubt an important

consideration in the commercial world, it cannot be everything. Relationships

such as those established by the first respondent with the applicant’s customers,

are generally built on trust and confidence which factors are substantially more

important in ensuring loyalty to the applicant.

CONFIDENTIAL INFORMATION

[20] The test for confidentiality is an objective one10. In Coolair Ventilator Co

(SA) (Pty) v Liebenberg11 Marais J said the following:

“The difficult question in each case would be to decide which information gleaned

by an employee is to be regarded as disclosable as being harmless or general

knowledge and what items are confidential or secret. The dividing line may move

from case to case, according to what is the general practice or convention in the

category of trade or manufacturing in which the plaintiff falls, with particular

reference to existing or potential competitors of his. If, however, it is objectively

established that a particular item of information could reasonably be useful to a

competitor as such, i.e. to gain an advantage of the plaintiff, it would seem that

such knowledge is prima facie confidential as between an employee and third

parties and that disclosure would be a breach of the service contract. If use has

in fact been made of it in an effort to harm the business interests of the plaintiff

the presumption will be even stronger that the employer and the employee, who

would in the course of his employment obtain knowledge of it, intended it to be

treated as confidential information not to be divulged to third parties.”

[21] In order to claim an infringement of its proprietary interests and therefore

the enforcement of a restraint, an employer need prove only that its erstwhile

10 Telefund Raiser CC v Isaacs 1998 (1) SA 521 (C) 523I. Also, Van Castricum v Theunissen 1993(2) SA 726 (T) 732 G-D. The mere ipse dixit of the applicant will not suffice to establish that information is confidential. Facts must be set up from which the conclusion can be drawn that something is indeed confidential or secret. See also Automative Tooling System (Pty) Ltd v Wilkens 2007 (2) SA 271 (SCA) 281B-D

11 1967 (1) SA 686 (W) 698 F-H

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employee is potentially able to exploit its trade secrets or business connections in

his or her new employment. The loyalty which the employees owe his or her

employer will be sufficient to create the real probability that he or she will,

consciously or unconsciously, do so.12 In Partserve Channel Support (Pty) Ltd v

Rajap,13 Mahlanya J said the following:

“The question whether the information which the applicant seeks to protect is

confidential or secret information can be answered by stating the following. The

first respondent admits that he had access to the applicant’s database including

information about applicant’s customer purchases. He further admits that he was

aware of the applicant’s full details when it came to profit margins, mark-ups and

marketing strategy including stock levels at any given time. In my opinion, all the

first respondent has admitted herein can be described as the applicant’s

confidential information or knowledge and indeed proprietary interests. This

information was obtained by him as a result of his position as an internal sales

consultant with the applicant.” 14

[22] There is no dispute in the present matter that during the first respondent’s

employment with the applicant she was integrally involved in negotiating prices

from and to the applicant’s suppliers. As a result of this she acquired detailed

knowledge of the applicant’s cost structures, turnover, margins, volumes and the

relative importance of each of its customers to the applicant’s business. In these

circumstances it can hardly be suggested that the first respondent did not acquire

confidential information which was not only useful to her but also was of

economic value to the applicant.15 The first respondent herself admits in her

answering affidavit that price is “everything” in the retail industry, which by its

nature involves high volumes. In my view, a competitive price which affects

profitability can only be achieved if one is possessed with confidential information

which can be used in the bargaining process. Inasmuch as the respondents

may wish to deny that the first respondent will not occupy a position similar to the

12 Turner Morris (Pty) Ltd v Riddell 1996 (4) SA 397 (E) 409J-140 A. Also, BHT Water Treatment (Pty) Ltd v Leslie 1993 (1) SA 47 (W) at 571 I-58D

13 [2005] J 13589 (W) p614 See also Poolquip Industries (Pty) Ltd v Griffin 1978 (4) 353 (W) 362 C-E15 Townsend v Leech 2001(4) SA 33(C)

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one she had with the applicant, their versions in the answering affidavits,16

although couched in veiled terms, leads to the inescapable inference that the first

respondent will continue as a procurement and sales executive as she did for the

applicant.

I accordingly find that the applicant has established that it has proprietary

interests in the nature of the two dealt with herein that are worthy of protection.

It follows that I am satisfied that the applicant has discharged the onus of

showing that it has a commercial interest that is deserving of protection at the

termination of the agreement and that such interest will be prejudiced by the first

respondent taking up employment with the second respondent and occupying a

similar if not the same position as she previously held with the applicant. The

only issue which remains to be decided insofar as the first respondent is

concerned relates to the reasonableness or otherwise of the restraint.

REASONABLENESS OF RESTRAINT

[23] It is well established that public policy requires contracts to be enforced.

This is consistent with the constitutional values of dignity and autonomy. 17 The

restraint agreement in this matter is not against public policy and no argument

was advanced by the first respondent that it was. The only complaint from the

first respondent is that the period of three (3) years is unduly long given her age

(which was said to be sixty three (63)) and her ability to secure alternative

employment. On this basis Mr Saks contended that given the nature of the

business and dynamic nature of the fashion industry, a restraint of six (6) months

would be reasonable in the circumstances. Given the nature of the first

respondent’s employment with the applicant, which related mainly to the sourcing

and supplying of hair accessories and related products, I consider that the

restraint period of three (3) years is a long time. The period of restraint should,

for all practical reasons,

16 First Respondent’s answering affidavit at page 97 (para. 1.1), page 115 (para. 82.1). Second Respondent’s answering affidavit, page 136 (para. 58)

17 Reddy v Siemen’s Telecommunications (Pty) Ltd supra

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“not be longer than is necessary to enable the applicant to place a new

salesperson in field in order to enable him or her to become acquainted

with the products and the customers and to make it place to the latter that

they are now the person with whom to deal on behalf of the applicant.”18

In the circumstances I consider a period of six months to be fair and reasonable

given the nature of the applicant’s business herein. Since the applicant has not

made out a case for the relief sought in paragraph 4 of the Notice of Motion, no

such relief will be granted.

CASE AGAINST SECOND RESPONDENT

[24] As already pointed out, the relief sought against the second respondent

stands on a different footing from that sought against the first respondent.

Whereas the relief against the first respondent is founded in contract, the relief

against the second respondent is founded in delict.

[25] It is well established that when an ex-employer seeks finally to interdict a

third party on the ground that it is competing unlawfully, by employing an ex-

employee who has breached a restraint, the ex-employer is required to prove

that:

a) It has confidential or trade secrets;

b) The third party is making use of, or is likely to make use of, such

information or trade secrets, either knowingly or innocently;

c) It has a real right not to be placed with unfair competition – in

deciding fairness, a court is entitled to look at the competing

interests of the parties; and

d) It has no other remedy.19

18 Per Wallis J in Den Braven, supra at page 263, para [55]19 See generally IIR South Africa v Hall (aka Baghas) 2004 (4) SA 174 (W) at 180 C-G

See also Kennitex Africa Limited v Coverite Limited 1967(3) SA 307 (W) at 309 D-F

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[26] In its founding affidavit the applicant relies on three pieces of evidence

which the applicant contends leads one to the conclusion that the respondents

are filching the applicants business. The three lines of evidence relied on are the

following:

1. Mr Price email exchange of 27 July 2011 (“RH6”);

2. Edgars Kiddies Headband’s email exchange (“RH4”);

3. Clicks meeting scheduled for 28 September 2011 (“RH7”).

[27] According to the applicant, the Mr Price email exchange provides prima

facie proof of an intention on the part of the first respondent to join the second

respondent’s employment and to take the applicants customer, Mr Price, with

her. The second respondent’s explanation pertaining to this email is to the

following effect:

“The email referred to relates to our attempt to sell licenced merchandise,

particularly the Marvel comic characters to Mr Price. Mr Price is however not

keen on this merchandise. Mr Price [in relation to the licenced Marvel comic

book merchandise] does not want to ‘come on board’.”

The applicant contends that a reading of this email suggests that the first

respondent intended to bring a lot more than just one of the applicant’s

customers with her. This further emerges from the reply sent by the member of

the second respondent who suggests that Mr Price’s “coming on board” is not

very important because it “really is only one customer”.

[28] Insofar as the issue relating to Edgars is concerned, the applicant contends

that kiddies headbands were sought for the benefit of the second respondent.

According to the applicant, in relation to at least two persons with whom the

respondent dealt in the course of her employment with the applicant (viz Doris

and Niki), the first respondent took active steps to conceal from the applicant, her

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communication with the persons concerned. The applicant contends that the

respondent’s explanation that the kiddies headbands were being sourced for the

benefit of the applicant is untrue because if it was true, there was no need for the

first respondent to communicate with the applicant’s employees on a “personal”

basis.

[29] Insofar as the email relating to Clicks is concerned, the applicant contends

that it is clear from the said email that the proposed meeting had everything to do

with “hair accessories”. The explanation provided by the second respondent with

regard to this email is that a person by the name of Scholtz was to attend the

Clicks meeting on the 28 September 2011 and not the first respondent. Mr

Scholtz is in fact the second respondent’s principle buyer/salesperson and the

former head buyer for Mr Price. According to the second respondent Mr Scholtz

is a well-known buyer and merchandiser for head gear and hair accessories. He

has contacts with almost all the major retail chains and was the driving force

behind the second respondent’s initiative to enter the hair accessory market. On

the basis of these emails and the explanations provided by the respondents,

which the applicant does not accept, the applicant contends that it is clear that

the first respondent was using her customer connections in order to solicit and

take away customers from the applicant to the second respondent.

[30] According to the second respondent (and this is not disputed), it is the

largest supplier of head wear and related accessories within the Republic of

South Africa. In fact, the second respondent has branches located in Durban,

Cape Town, Johannesburg and Port Elizabeth. It is also in the process of setting

up a business unit in the United Kingdom. The deponent to the second

respondents answering affidavit, Bevan Edgeley (“Edgeley”), makes the point

that whilst the second respondent will enter the hair accessories market, the

second respondent intends to source its products through its own efforts and not

by targeting those products specifically marketed by the applicant. According to

Edgeley, the second respondent employs approximately sixty (60) staff

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members, the majority of whom are involved in the actual business operations of

the company, including supply chain management, costing, sales and

development, marketing, research and general administration. Unlike the

applicant, the second respondent contends that its business is geared towards

actual supply and delivery of products and not largely warehousing. There is no

dispute that the second respondent does a turnover in excess of R90million and

whereas the applicant does an annual turnover not exceeding R20 to R25million.

The second respondent contends that in the course of its business it developed

strong business connections within the retail and wholesale apparel and

accessories sectors. It states that the second respondent does approximately

R3million to R4million per month of business with the Mr Price Group. It further

contends that as a result of its business operations, the second respondent has

established strong working relationships with buyers, suppliers and other key

personnel of various high profile customers including the customers listed by the

applicant namely, Clicks, Foschini, Milady’s, Edgars, Mr Price and Spar.

[31] According to Edgeley, he and Ambler-Smith took a decision almost two (2)

years ago to enter the hair accessories market. That decision was motivated by

the fact that they had access to the wealth of knowledge and skill possessed by

Watzek who is his father-in-law. Watzek is regarded to be a pioneer in this field.

The second respondent contends that Watzek’s knowledge of this business far

exceeds any information that the first respondent may possess. The second

respondent contends that over the years it developed its own methodologies

relating to price structures, turnover margins etc., and does not need to rely on

such information either from the first respondent or the applicant. Additionally,

any information which the second respondent requires in this market, it can

obtain from Watzek directly. Watzek owes no fiduciary duty to the applicant in

this regard.

[32] In the IIR South Africa BV trading as Institute for International Research v

Hall case, supra, the court considered whether, on the facts, an interdict could be

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granted against the ex-employee’s new (but in that case erstwhile) employer in

circumstances where, immediately upon learning that the ex-employee was

subject to a restraint, the new employer had dismissed her. Despite the

dismissal, the applicant nevertheless sought to interdict the second respondent

from holding conferences organized whilst the ex-employee was still in his

employ. The court held that, on the facts of that case, it could not. Schwartzman

J held as follows:

“[20.1] An ex-employer having protectable confidential information gets the

benefit of its contractual bargain against the ex-employee by obtaining an

interdict against his or her continued breach of the restraint in taking up

employment with a competitor.

[20.2] The competitors employment of the ex-employee with or without

knowledge of the restraint cannot of itself amount to the delict of unlawful

competition. Unlawful or unfair competition can only result if the new employer,

through the ex-employee, uses either intentionally or innocently confidential

information of the ex-employer.

[20.3] In such circumstances, the ex-employer is entitled to an interdict against

unfair competition.

[20.4] An interdict is granted to prevent a future unlawful act, wrong doing or

harm. The competitors’ only ‘unlawful’ act or wrong doing was to employ a

person bound by a restraint. This act did not result in the misuse of any

confidential information of the ex-employer. Any harm that the ex-employee

might have caused during the remaining period of restraint was obviated by the

interdict granted against the ex-employee. To interdict the competitor from

holding the two conferences appears to be nothing more than a punishment for

unwittingly employing the person subject to a restraint. There is no public policy

or legal requirement to justify such an order.”

In the final result the court found that it had not been shown that, during the

period of the first respondents employment with the second respondent, the first

respondent had imparted any confidential information, or that the second

respondent had used such information in the planning or production of the

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fourteen (14) conferences, the holding of which the applicant sought to interdict.

In Vital Administration CC v Irenco (Pty) Ltd20 Bertelsmann J said that

“as long as the third respondents principle aim was to benefit itself by enticing

applicants employees to join its service, that object was lawful, even if the

applicant might have suffered severely as a result thereafter”.

[33] While it may be accepted that the applicant and the second respondent are

trade competitors, the size of the second respondent’s business operations, its

unique costing program developed by “iSync Solutions”, its annual turn-over,

profit margins and volumes, in my view, far exceed that of the applicant.

Additionally, I consider that the second respondent’s access to Watzek who by all

accounts is a pioneer in the business of acquisition, marketing and supply of hair

accessories, places the second respondent in a completely different league from

the applicant. There is no dispute that the second respondent has already

established a strong business relationship with some of the major retailers such

as Mr Price, Foschini, Miladys etc. The second respondent has made out a

compelling case that it is not reliant on any confidential information or customer

connections that the first respondent has acquired through her employment with

the applicant. In my view, the applicant, on whom the onus rests in this regard,

has failed to prove that the second respondent has solicited and/or taken away

any of the applicant’s customers by exploiting any information in possession of

the first respondent. I further consider that interdicting the first respondent is

enough and obviates the need to interdict her new employer as well. The case

against the second respondent is at best highly speculative and does not justify

the orders sought against it. It follows then that the application against the

second respondent must fail.

ORDER

20 [2004] 4 All 354 (T)

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[34] For the reasons set out above, I grant the following order:

1. The first respondent is interdicted and restrained, for a

period of six (6) months commencing 24 August 2011 and

terminating on 24 February 2012, anywhere within the

Republic of South Africa, and whether directly or indirectly

and whether solely or jointly with any other person, from:

1.1carrying on; or

1.2being engaged, concerned or interested in or employed

by; or

1.3soliciting business for; or

1.4being a proprietor of or director, shareholder, member

or partner in; or

1.5acting as a consultant, trustee, manager, employee,

agent, representative, partner, advisor, officer or in any

other capacity to; or

1.6rendering any service to,

any business, person, company, close corporation,

partnership, trust, body corporate or incorporate, association

or other legal entity which within the Republic of South Africa

competes with or endeavours to compete with the applicant

in relation to the applicant’s clients, including, without limiting

the generality of the aforegoing, the second respondent,

insofar as the second respondent continues to compete or

endeavours to compete with the applicant in relation to the

applicant’s customers.

2. The first respondent is interdicted and restrained, for a

period of six (6) months commencing 24 August 2011 and

terminating on 24 February 2012 from, anywhere in the

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Republic of South Africa, canvassing, influencing or trying to

persuade any customer of the applicant to take its custom

elsewhere and/or to purchase the services and/or goods

offered by the applicant from any other person/entity,

including, without derogating from the generality of the

aforegoing, the second respondent, and, for the purposes of

the aforegoing “customer” shall mean any person/entity

listed in annexure “B” to the notice of motion.

3. The first respondent is interdicted and restrained from at any

time utilizing, divulging and/or disclosing, whether directly or

indirectly, to any person any of the applicant’s confidential

information pertaining to the applicant’s business.

4. The first respondent is directed to pay the applicant’s costs

of the application.

5. The application against the second respondent is dismissed

with costs.

Date of Hearing : 21 October 2011

Date of Judgment : 23 November 2011

Counsel for Applicant : Adv. M Smithers SC

Instructed by : Barkers Attorneys

Counsel for First Respondent : Adv. Saks

Instructed by : Hassan, Parsee & Poovalingam

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Counsel for Second Respondent : Adv. I Pillay

Instructed by : MacGregor Erasmus Attorneys

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